Federal Commissioner of Taxation v Thorogood

40 CLR 454
1929 - 0916B - HCA

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(Judgment by: Starke J)

Federal Commissioner of Taxation
v Thorogood

Court:

Judges: Isaacs ACJ
Higgins J

Starke J

Subject References:
Taxation and revenue
Income tax
Sales during year of assessment
Payments by installments over several years
Income "derived"

Legislative References:
Income Tax Assessment Act 1922 (Cth) No 37 - ss 4; ss 13; ss 16(a); ss 19; ss 25; ss 51

Hearing date: PERTH 9 September 1927; 12 September 1927; 16 September 1927;
Judgment date: 16 September 1927

Perth

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Judgment by:
Starke J

STARKE J. The Commissioner or his officers evidently misunderstood Perrott's and Burke's Cases ^[F10] and assessed the taxpayer on an arbitrary and capricious principle, which has no warrant in law and worked a serious injustice to him in the way of penalties. The Commissioner's method of assessing profits on the sale of land on extended terms was thus expounded to the Board of Review by Mr. Gibson, an officer of the Commissioner:"We have the authority of the High Court in two cases to say that profits should be taxed in the year of sale and ... assessing on the basis of receipts or the profits contained in the receipts of the year is only a concession. ... He" (the Commissioner) "prescribes the conditions" (of concession to taxpayers) "and says that where taxpayers keep their books so as to treat the profit as only accruing year by year, he is prepared to accept them: where taxpayers treat themselves as having received the whole profit, as they do in law, in the year of sale, he cannot go any further. ... Therefore, as the Department has been put to considerable trouble in this case and as the case does not either by virtue of the manner in which the books are kept or in any other aspect fall into the class of case which the Commissioner considers is suitable for the granting of the concession, ... the taxpayer has no claim. He has no claim as of merit and he certainly has none as of right." All this is wholly wrong. It is the income that is derived from sources within Australia during the period of twelve months preceding the financial year that is assessable as income tax. The amount of that income in the case of profits on a sale of land on extended terms is one of fact and depends upon the circumstances of each particular case. It certainly does not depend upon the grace or concession of the Commissioner but depends upon a proper determination of the amount according to law. This appeal only sought to establish the principle contended for by the Commissioner, and did not otherwise attack the method adopted by the Board of Review for ascertaining the income of the taxpayer. The method adopted by the Board of Review for ascertaining that income also seems open to objection and to be somewhat unfavourable to the taxpayer, but as it was not challenged on this appeal no more need be said about it.

This appeal ought to be dismissed.